New Plan Could Save Drowning Homeowners

Economists and banking industry analysts are increasingly crawling out of the woodwork with ideas on how America can get out of the ongoing mortgage mess. But one financial firm stands out from the crowd with an idea to offer up-to-date homeowners reduced rates on their home loans, with no credit report, and/or consideration of the current value of their homes.

According to the Center for Housing Policy, there’s been a 32% increase in what the Center calls “seriously delinquent” mortgages from 2009 to 2010. Roughly one-in-ten are in that category.

“These new delinquency data confirm that the number of foreclosures is likely to continue to rise," said Jeffrey Lubell, executive director of the Center for Housing Policy, the research affiliate of the National Housing Conference.

In another study, Deutsche Bank estimated that 14 million U.S. homeowners are “underwater” (meaning their loan amounts are higher than the value of their homes), and that number should rise to 20 million by 2010.

How can delinquent borrowers and corner-cutting lenders find common ground and possibly save the U.S. housing market?

The Collingwood Group, a Washington, D.C.-based financial advisory firm, has an idea that they say could keep both parties satisfied. The plan, which Collingwood says would need the full support of both the mortgage industry and the federal government, is built on the premise that as long as so many Americans are behind or underwater on their mortgages, the U.S. housing market will continue to get dragged down.

Essentially, Collingwood proposes a “rapid refinance” plan, with reduced interest rates, and possibly some loan principal reduction, but with a twist.

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